chapter 12,13,14 smart book Finance
Dividends are the ________ component of the total return from investing a stock
income (dividends are always paid out in cash)
The WACC is the minimum return a company needs to earn to satisfy
its bondholders its stockholders
The second lesson from capital market history is that there is a link between risk & ________
return
To estimate the expected return on a risky asset, we need to know the ___. Multiple select question. stock's beta risk-free rate market risk premium annual dividend amount
stock's beta risk-free rate market risk premium
The excess return on a risky asset is the difference between the risky return and....
the risk-free rate
True or false: The return an investor in a security receives is equal to the cost of the security to the company that issued it.
true
The cost of capital depends on the _____ of funds, not the _____ of funds. Multiple choice question. source; use use; inflation use; source
use; source
The square of the standard deviation is _________
variance
What does WACC stand for?
weighted average cost of capital
a normal distribution has what type of shape....
(bell-curve) (symmetrical)
Based on average historical returns shown in the text, small-company stocks increased in value by ____ percent in a typical year
16%
Average Returns can be calculated how many different ways
2 different way
If you are forecasting a few decades in the future, you should calculate the expected return using....
Blume's Formula
when a company declares a dividend, shareholders generally receive...
CASH
what is commonly used to measure inflation
CPI - consumer price index
The formula for calculating the cost of equity capital that is based on the dividend discount model is:
RE = D1/P0 + g
the excess return on a risky asset is the difference between the __________ ________ and ____ ____ _____
RISKY RETURN and RISK FREE RATE
What ratio is calculated as the risk premium of the asset divided by the standard deviation
Sharpe Ratio
The Geometric Rate of Return takes what into account?
compunding
A firm's overall cost of capital will include both its cost of____capital and equity capital.
debt
Finding a firm's overall cost of equity is (straightforward/difficult).
difficult
defined as the annual dividends amount DIVIDED by the standard deviation
dividend yield
The return an investor in a security receives is ______ the cost of the security to the company that issued it.
equal to
